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THE ABSORPTIVE CAPACITY OF TOURISM ORGANISATIONS Abstract

Absorptive capacity, one of the most prominent constructs in innovation research over recent decades, has advanced theoretically without consideration for the peculiarities of tourism and tourism enterprises. At its core is the notion that an ability to acquire, assimilate, transform and exploit external knowledge generates competitive advantage. Following a review of the literature and a study of absorptive capacity in the international meetings industry, a new theoretical model is proposed. The paper also provides the means by which policy-makers might, for the first time, assess levels of absorptive capacity in destinations.

Keywords: innovation; innovation policy; business events; professional conference organisers (PCOs); knowledge; destination competitiveness.

1.0 INTRODUCTION

Reviews of the literature on innovation in tourism have highlighted a number of deficiencies. Among

these, as others have noted (e.g. Brooker and Joppe, 2014; Hall and Williams, 2008; Hjalager, 2010),

is the low incidence of papers on the innovative practices of commercial tourism enterprises. A study

of one important dimension of organisational innovation, namely absorptive capacity (or the ability

to acquire, assimilate, transform and exploit external knowledge for competitive advantage), is

reported in this paper. Absorptive capacity (Cohen and Levinthal, 1990), and its refinements over

the past two decades (e.g. Patterson and Ambrosini, 2015; Todorova and Durisin, 2007; Zahra and

George; 2002), represents “one of the most important constructs to emerge in organisational

research in recent decades” (Lane, Koka and Pathak, 2006, p833), yet remains “a particularly

neglected area of research within tourism studies” (Shaw, 2015, p46).

Scholars of innovation now recognise the importance of sectoral context (see Autio, Kenney, Mustar,

Siegel and Wright, 2014; Garud, Gehman and Giuliani, 2014; Vega-Jurado, Gutierrez-Garcia,

Fernandez-de-Lucio and Manjarres-Henriquez, 2008) and this is reflected in a growing number of

contributions that take into account the peculiarities of tourism (e.g. Brooker and Joppe, 2014;

Camison and Monfort-Mir, 2011; Decelle, 2004; Hjalager, 2015; Thomas and Wood, 2014; Williams

and Shaw, 2011; Zach, 2012). This paper examines absorptive capacity in the meetings industry.

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staging business events, and agencies that organise conferences (professional conference organisers

or PCOs). The relative academic oversight of these organisations is surprising because there has

been a sustained growth of research generally on planned events and tourism (e.g. Getz, 2008;

Gursoy and Kendall, 2006; Prentice and Anderson, 2003). Moreover, business events have become

routine components of tourism policy discourses internationally (Hall, 2009; Rodriguez, Williams and

Hall, 2014), as is exemplified by the recent agreement between the Joint Meeting Industry Council

(JMIC), the United Nations World Tourism Organisation (UNWTO) and the World Travel and Tourism

Council (WTTC) (IMEX, 2014).

The UNWTO, in conjunction with agencies such as Meetings Professional International (MPI) and

the International Congress and Convention Association (ICCA), defines a meeting as a gathering of

ten or more people in a contracted venue for at least four hours (UNWTO, 2014, p10). These

meetings encompass exhibitions, incentive events, corporate or business meetings as well as

conferences and conventions. The precision of this international definition belies the challenges

involved in gathering accurate data on the supply of, and demand for, meetings (Hodur and

Leistritz, 2006; UNWTO, 2014). There are, however, several discernible structural features of the

meetings industry which, a priori, make ideas of absorptive capacity developed among

manufacturing firms potentially less pertinent.

The first is the high incidence of small and medium sized enterprises (SMEs)(Rogers, 2013).

Informality, contrasting access to resources and the personalised manner of management have long

been accepted as among the most important conceptual differences between smaller and larger

businesses (e.g. Barney, Wright and Ketchen, 2001; Penrose, 1959; Woods and Joyce; 2003). Studies

of absorptive capacity conducted among large bureaucratic manufacturing enterprises may,

therefore, be of limited value for those interested in the dynamics of the meetings industry.

Secondly, the structure and organisation of large international PCOs differs from apparently

comparably sized enterprises in manufacturing. Many of the former employ numerous freelance

‘associates’ (who may or may not be contracted exclusively) on a short-term, and often regularly

renewed, basis (McCabe, 2009; Weber and Ladkin, 2009). Arguably, and to borrow from

Granovetter (1973), these relatively weak employment ties contribute to their commercial strength

by enabling PCOs to successfully manage significant fluctuations in demand over space and time and

to deliver bespoke events almost anywhere in the world (Rogers, 2013). Convention bureaus that

assemble packages to attract various major peripatetic association or corporate events exhibit

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to develop the affective-commitment and trust among employees necessary to enable the effective

sharing of information (Hashim and Tan, 2015) and undermine the potential applicability of current

models of absorptive capacity to the meetings industry. Finally, the valuing of knowledge in the

meetings industry contrasts with that in many manufacturing enterprises. There is an extensive

literature on knowledge, knowledge management and knowledge networks in tourism (e.g. Cooper,

2006; Czernek, 2014; Jacob, Florido and Payera, 2014; Reinl and Kelliher, 2010; 2014; Shaw and

Williams, 2009) which, collectively, paints a picture of a sector where there is little emphasis on

gaining competitive advantage from acquiring or using highly technical formal knowledge. Instead,

knowledge is often tacit and transferred informally within familiar and either relatively

unsophisticated (Thomas, 2012) or sophisticated knowledge networks (Reinl and Kelliher, 2014).

This holds potential implications for conceptualisations of absorptive capacity in tourism.

Although there are occasional suggestions that the role of knowledge as an explanatory variable in

firm performance is exaggerated (e.g. Alvesson and Spicer, 2012), the broad consensus within both

the tourism and innovation literatures is that an ability to gather and use information is very closely

tied with an organisation’s ability to innovate (Cooper, 2006;; Fosfuri and Tribo, 2008; Gallego,

Rubalcaba and Suarez, 2013; Koostopoulos, Papalexandris, Papachroni and Ioannou, 2011; Scott,

Baggio and Cooper, 2008; Shaw and Williams, 2009; Xiao and Smith, 2007). Additionally, knowledge

management has been found to contribute to the competitive advantage of small as well as large

businesses (Fogg, 2012; Harris, McAdam, Mccausland and Reid, 2013; Tejada and Moreno, 2013),

though there is less agreement on how processes of knowledge acquisition and utilisation influence

performance among this constituency. Recent investigations of the importance of ‘familiarity’ within

networks (Zheng and Yang, 2015) and the role of ‘commitment-trust’ (Hashim and Tan, 2015) are

potentially valuable considerations when discussing knowledge exchange in this context.

Arguably, external knowledge plays a particularly important role in tourism (King, Breen and

Whitelaw, 2014; Williams and Shaw, 2011). This may be explained by noting that many tourism

enterprises operate open systems of innovation i.e. they do not spend significantly on in-house

research and development (R&D) but rely instead on suppliers, customers and business networks

(Laursen and Salter, 2014; Mina, Bascavusoglu-Moreau and Hughes, 2014; West, Salter,

Vanhaverbeke and Chesbrough, 2014). Nieves and Segarra-Cipres’ (2015) recent contribution

suggests that it would be erroneous, however, to assume that the existence of networks inevitably

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in-house capability are more likely to be able to exploit potentially valuable external knowledge

(Vega-Jurado, Gutierrez-Garcia and Fernandez-de-Lucio, 2009).

Albeit in a different context, some commentators have recently emphasised the role of

organisational leadership as a means of “encouraging the flow of knowledge among organizational

members (which serves to challenge the) status quo in organisations” (Parakevas, Altinay, McLean

and Cooper; 2013, p135). It is probable that such concerns are particularly acute in a sector where

SMEs dominate but may also resonate with analyses of organisations that are fragmented (Rogers,

2013). This paper builds on existing sector specific studies by examining absorptive capacity in the

international meetings industry.

2.0 ABSORPTIVE CAPACITY: THEORETICAL CONSIDERATIONS

Studies of absorptive capacity resonate closely with, and should be conceptualised as sitting within,

wider notions of open innovation (Chesbrough, 2003). That vein of research, which has attracted an

“avalanche of interest” over the past decade (West et al., 2014, p805), suggests that innovative

organisations tend to collaborate with external actors in a variety of ways in order, inter alia, to

secure new knowledge (Laursen and Salter, 2014). The relational approach which is emphasised

involves significant informal as well as formal networking activity, potentially involving reciprocity of

value (Ritala, Olander, Michailova and Husted, 2015), and results in outward-looking business

strategies. Primarily theorised in the context of manufacturing, ideas of open innovation are,

nevertheless, as relevant to service organisations but initial research suggests that they lead to

different ways of innovating (Mina et al., 2014).

Absorptive capacity has been largely ignored or has been tangential to research conducted by

scholars with an interest in tourism (Carlborg, Kindstrom and Kowalkowski, 2014; Hjalager, 2015;

Weidenfeld, Williams and Butler, 2009). Valentina and Passiante (2009) utilised ideas of absorptive

capacity for their research on small and medium sized enterprises. They found that external

networks were valuable sources of knowledge. However, unless owner-managers were able to

share information with employees, innovation was not likely to emerge.

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………. refers to one of a firm’s fundamental learning processes: its ability to

identify, assimilate, and exploit knowledge from the environment. These three

dimensions encompass not only the ability to imitate other firms’ products or

processes but also the ability to exploit less commercially focused knowledge,

such as scientific research. Developing and maintaining absorptive capacity is

critical to a firm’s long term survival and success because absorptive capacity can

reinforce, complement, or refocus the firm’s knowledge base.

The theoretical antecedents of absorptive capacity are usually attributed to the work of Cohen and

Levinthal (1990). However, Zahra and George’s (2002) theoretical refinements represent a more

convenient starting point for this paper. They conceptualise absorptive capacity as a dynamic

capability. That it is a dynamic capability is critical because, as Sun and Anderson (2008, p134)

emphasise, “a dynamic capability … reflects the ability of an organisation to respond to strategic

change … by reconstructing its core capabilities”. Zahra and George (2002) suggest four capabilities

or dimensions of absorptive capacity: acquisition, assimilation, transformation, and exploitation.

The intensity, speed and scope of activity affects the potential value of knowledge acquisition which

is the first capability identified. The second, labelled assimilation, relates to an organisation’s ability

to interpret, for strategic purposes, the knowledge acquired. Clearly, simply acquiring new

knowledge but not recognising its potential importance to the organisation is unlikely to yield

progress towards innovation. The third capability, knowledge transformation, involves combining

new knowledge with that which exists within the organisation already to enable novel

understanding. As Zahra and George (2002, p190) suggest, “the ability of firms to recognize two

apparently incongruous sets of information and then combine them to arrive at a new schema

represents a transformation capability … It yields new insights .. (and changes how) .. the firm sees

itself and its competitive landscape”. The final capability involves establishing procedural

mechanisms so that organisations are able to exploit new knowledge enabling them to innovate by

altering current practices or beginning new ones (Easterby-Smith, Grace, Antonacopoulou and

Ferdinand, 2008).

The four capabilities discussed above are categorised by Zahra and George (2002, p190) as potential

(acquisition and assimilation) and realized (transformation and exploitation) absorptive capacity.

Together they represent “a coherent dynamic capability that fosters organisational change and

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held to enable or limit absorptive capacity and its implications for innovation. Prior experience of,

and the learning associated with, searching for and using external sources of knowledge are

considered to be important antecedents of absorptive capacity.

Figure 1 A model of absorptive capacity

Source: Adapted from Zahra and George (2002, p192); Todorova and Durisin (2007).

The model also highlights the role of activation triggers which are factors that “encourage or compel

a firm to respond to specific internal or external stimuli” (Zahra and George, 2002, p193). By way of

illustration, uncompetitive business performance or innovation elsewhere may stimulate a

management reaction. The nature of the activation trigger will affect the vigour of the reaction and

the nature of the search (Van de Ven, Poley, Garud and Venkataraman, 2008).

Social integration mechanisms highlight the need to share knowledge within organisations if

potential absorptive capacity is to be realised. As others have noted, potential structural, cognitive, External sources of

knowledge and complementarity

Experience

Absorptive capacity

POTENTIAL

Acquisition

Assimilation

REALIZED

Transformation

Exploitation

Competitive advantage

Strategic flexibility Innovation

Performance

Activiation triggers

Regimes of appropriability Social

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behavioural and political barriers may limit knowledge sharing to the detriment of mutual

understanding. Thus, Todorova and Durisin (2007), for example, argue that power relations within

organisations act as an important moderating factor in valuing and exploiting new knowledge. The

nuanced evidence provided by Easterby-Smith et al. (2008) suggests that systemic power or seniority

plays an important role in knowledge acquisition but that it is episodic power, or that derived from

coalitions of interests that emerge in particular circumstances, which is vital for sustaining the

exploitation of knowledge.

In spite of widespread recognition in the literature that social relations within organisations are

critical to absorptive capacity, “our understanding of how new knowledge is assimilated internally

and the role of individual actors and organizational conditions remains incomplete” (Hotho,

Becker-Ritterspach and Saka-Helmhout, 2012, p384). Nevertheless, the idea has gained some traction in

the tourism (Nieves and Segarra-Cipress, 2015) and management literatures (Chang, Gong, Way and

Jia, 2013; Hau, Kim, Lee and Kim, 2012). Zahra and George (2002) use a range of evidence to show

that formal means of sharing knowledge are generally more effective than informal ones. The ability

to learn from past experience, coupled with a flexible approach to human resource management,

appear to go some way to explaining differences in performance between organisations or temporal

differences within the same organisation (Chang et al. 2013).

The only dedicated study of absorptive capacity in tourism enterprises was undertaken recently by

Thomas and Wood (2014). Their analysis reveals that activation triggers and prior experience

(learning) become influential in hotels, their testbed, once knowledge acquisition has taken place.

The enterprises they studied tended to acquire knowledge, often via highly personalised channels,

but did not utilise it effectively for innovative purposes unless provoked to do so by events

(activation triggers). Further, their experience of using – rather than of acquiring – external

knowledge represents an integral part of the process of exploiting knowledge.

‘Regimes of appropriability’ represent the final dimension of prominent conceptualisations of

absorptive capacity. This element refers to an organisation’s ability to retain the competitive

advantage it derives from its absorptive capacity by making it difficult for competitors to imitate its

innovation (Laursen and Salter, 2014). The use of various ‘isolating mechanisms’ (such as secrecy),

which limit ‘knowledge spillovers’, may be important in this regard but are unlikely to be significant

in the meetings industry, or even in tourism generally. Where temporary employment is widespread

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flows is reduced. Further, as many innovations are easily replicable and often emerge from outside

the sector (Hjalager, 2015), creating effective regimes of appropriability is a much more challenging

prospect.

3.0 RESEARCH DESIGN AND METHODS

Data for this project were collected in two stages. The first involved interviewing the Chief Executive

Officer (CEO) or director level staff of four Destination Marketing Organisations (DMOs) responsible

for attracting major meetings to particular destinations (three of the four were convention bureaus).

This was followed by interviews with similarly senior officers at five professional conference

organising companies (PCOs) who worked internationally. At least two of the latter offered

marketing and other services in addition to organising meetings. Each of the interviewees was

nominated by a director-level member of the International Congress and Convention Association

(ICCA). To qualify for inclusion, each individual had to be seen as a leading and innovative

practitioner who operated in more than one country. This reputational criterion was demonstrated

in a number of ways; they had won awards, were prominent in the trade press or led what was seen

by an ICCA director as an iconic organisation. Inevitably, these often overlapped. Interviewees were

located in nine countries which were spread between three continents. The availability of these

senior personnel was often limited. As a result, most interviews, even those conducted face-to-face

(five of the nine), lasted slightly less than an hour.

The purpose of the interviews was twofold. The first was exploratory. Each semi-structured

interview examined the approach to innovation of the interviewee’s organisation, initially via a

series of open questions. These were complemented with probing questions to consider the

potential conceptual value of absorptive capacity as currently theorised. This helped inform the

development of the research instrument, a questionnaire, for use in the main part of the study.

Secondly, the insights gained from the interviews provided perspectives on the meetings industry

which informed the interpretation of the findings. These included broader questions about the

operations of their business and trends in the sector.

The second stage consisted of a web-based survey of members of ICCA. Many studies of innovation

use indicators such as expenditure on research and development as surrogate measures of

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(Camison and Fores, 2010; Daspit and D’Souza, 2013; Flatten, Engelen, Zahra and Brettel, 2011;

Jimenez-Barriouevo, Garcia-Morales and Molina, 2011), the research has been undertaken primarily

among manufacturing enterprises. Although potentially useful in some circumstances, they are

deficient in the context of tourism (Hall and Williams, 2008; Hjalager, 2010; Shaw and Williams,

2009) and are too crude to enable an analysis of the components of absorptive capacity.

Other researchers have more recently developed multi-dimensional scales to interrogate the

conceptual dimensions of absorptive capacity (notably Camison and Fores, 2010; Daspit and

D’Souza, 2013; Delmas, Hoffman and Kuss, 2011; Flatten, Engelen, Zahra and Brettel, 2011;

Jimenez-Barriouevo, Garcia-Morales and Molina, 2011; Jiménez-Castillo and Sánchez-Pérez, 2013; Thomas

and Wood, 2014). Even though each of those cited used slightly differing formats, wording and

approaches to item development, they all indicated some convergence in the measurement of

absorptive capacity as a multi-dimensional construct. Initially, this study also used a scale with a

relatively large number of items (adapted from previously validated scales) within each of the four

hypothesised factors. This allowed for further validation of the existing items and elimination of

‘unhelpful’ items. The aim of this was to develop a more parsimonious scale (with no extraneous

items and fewer questions) fitting the specificities of the meetings industry.

The survey instrument comprised a number of distinct sections. The first part gathered

categorisation data on the respondent (role, length of time in role, length of time in organisation)

and the organisation (type, years in operation, size). This allowed for sub-group analysis within the

overall sample. The second section contained a simple uni-dimensional measure (“Does your

organisation learn from other organisations?” and “If, so, how many does it learn from regularly?”)

to help ascertain construct validity and to encourage the respondent to begin thinking about

absorptive capacity. The survey then moved on to four separate sections on each of the

hypothesised sub-constructs (acquisition, assimilation, transformation and exploitation).

Differing slightly in the number of items used, each section included three question banks which

asked the respondent to think about one organisation they learn from regularly, to then compare

their organisation with others in the industry and, finally, to describe their own organisation’s

activity. The statements were generated using previously validated scales which were adapted for

the meetings industry using the terminology that arose in the pre-survey interviews. A five point

response scale was used for each statement. Further statements were then used to assess the

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exploitation) absorptive capacity, asked as a comparison with others in the industry. The survey

concluded with open questions inviting a description of a recent innovation in the business and an

explanation of how it came about, potentially providing examples of absorptive capacity in practice.

A final scale question rating the organisation’s innovativeness against the sector as a whole allowed

for a comparison between the absorptive capacity of those who thought of their organisation as

highly innovative with those who thought they were less so.

A pilot test of twenty organisations in the meetings industry gave an estimate of the expected level

of non-response (5 out of 20). Follow-up telephone interviews were used to identify the reasons for

this and design weaknesses within the questionnaire. Based on the pilot test, changes were made to

wording, format and the introductory text. Using the ICCA global membership database, a sampling

frame of 1018 was identified, comprising 332 venues, 257 meeting management businesses, 331

destination marketing organisations and around 98 meeting support companies from around the

world (85 Africa/Middle East, 212 Asia Pacific, 572 Europe, 77 Latin America and 114 North

America). Due to the relatively low response rates encountered in previous studies

(Jimenez-Barriouevo et al, 2011; Flatten et al 2011; Daspit and D’Souza, 2013 and Thomas and Wood, 2014),

the survey was sent to named individuals in all 1018 organisations.

Emails were sent from a known source (ICCA) explaining the project and including the weblink to the

survey. In order to avoid duplication by having more than one member from each organisation,

emails were sent to the most senior member of the subscribing organisation only. Although other

studies have gathered data from employees (Flatten et al, 2011), it was felt that those in more senior

positions would provide better informed responses given the role they play in influencing the

organisational culture within which innovation takes place (DeGroot, Kiker and Cross, 2009; Elenkov,

Judge and Wright, 2005). In addition to the initial invitation, two reminders were sent. This resulted

in 322 replies which represents an initial response rate of 31.6%. After data cleaning and removal of

those with substantial missing data, there were 208 full responses, giving a final response rate of

20.4%. This is typical of similar surveys and higher than many. Some level of non-response was

expected because of the complexity of the questions and the time constraints on those in senior

positions being surveyed.

Non-response bias using Armstrong and Overton’s (1977) extrapolation method (comparing early

and late responders) revealed no significant differences between the two groups (the assumption

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non-response showed that most were related to changes in position, leave/holiday period or the

survey being undertaken during a busy period. Given the relative homogeneity of the target

population (i.e. a well-defined sector) albeit with hypothesised differences on the topic being

researched, the level of confidence (95%) and the accuracy required, suggested a final sample of

over 200 was deemed acceptable for the analysis to be undertaken (Blunch, 2013), including some

sub-group analysis where numbers were sufficient.

Inevitably, the study has limitations. Principal among these is the uncertainty about the extent to

which the sampling frame is representative of the meetings industry. It is possible to argue that the

leading international representative association from which the sample was derived will contain the

most innovative of organisations in that sector. Yet, this is equally difficult to substantiate. It is

possible, that by relying on the kind of formal network used in this study, important characteristics

of organisations that choose not to belong, the majority, remain unearthed.

The second limitation relates to the reliance on only one respondent from each organisation.

Though not unusual in this kind of research, a more reliable picture would emerge from multiple

perspectives on each organisation. Additional insights would also emerge from knowing more about

the kinds of knowledge utilised by organisations in the meetings industry and its perceived relative

value.

4.0 ABSORPTIVE CAPACITY IN THE MEETINGS INDUSTRY

4.1 Survey sample characteristics

The survey resulted in 39% of responses from destination marketing organisations, 35% from

venues, 20% from PCOs and 6% from meetings support companies. This represented a similar

proportional breakdown to that found in the overall population (based on ICCA membership). The

majority of respondents within these organisations held senior positions with 39% reporting

themselves as CEOs, directors or owners, 11% as general managers and 23% as other senior

managers. A further 28% were heads of department or middle managers. The length of time these

respondents had held their post ranged from two months to twenty years and their time with the

organisation also showed a wide spread from less than a year to more than forty years with a similar

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Organisational size was measured using the number of full time equivalent employees. Predictably,

the majority of companies could be categorised as small to medium sized but with a number of

micro-businesses/sole traders and a small proportion of large companies (3.8% with more than 500

employees). This again gives a useful range of sample characteristics which can be used to explore

levels of absorptive capacity within the sector.

The final sample characteristic of interest was the number of organisations from whom respondents

regularly acquire knowledge, as this is theorised to be an important element of absorptive capacity.

In this case, almost a quarter (24%) reported learning from between one and three organisations

regularly, almost half (49%) between four and six, eight per cent between seven and nine, and

eighteen percent claimed to learn from ten or more organisations.

4.2 Scale refinement

Before analysing the data to explore absorptive capacity within the meetings industry it was

necessary to conduct a preliminary analysis of each of the items within the scale. Several items were

found to have very high means and/or a low variance. These were excluded from the scale as they

were likely to be affected by positive response bias and contribute little to differentiating between

respondents. These were AQ3 “There is mutual respect between us”; AQ6 “We collect information

through informal means”; AQ9 “We expect employees to use information from within our industry”;

and EX6 “Our business supports the development of new service ideas”. It is reasonable to infer

from this that there is agreement in the sector on these points and, therefore, they are unlikely to

offer any significant competitive advantage.

In order to test the reliability of the scale made up of the remaining 50 items, Cronbach’s alpha test

was applied. The results gave a Cronbach’s alpha statistic of 0.926 suggesting reliability (Cronbach’s

alpha> 0.9) (though scales with a large number of items tend to have higher alpha scores). It also

indicates that the deletion of any one item would not improve the reliability of the scale. A

preliminary analysis of the inter-item correlations suggested that there are groupings of items within

the overall sample. This was, therefore, explored further.

Factor analysis using principal components (suitable for ordinal data) was undertaken to investigate

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showed that most items share variance with the extracted component but that ten share less than

10%. These include six items from the bank that were used to assess acquisition (AQ), three from

assimilation (AS) and one from exploitation (EX). One interpretation is that the items measuring

acquisition and, to some extent assimilation, contribute less to absorptive capacity than

transformation and exploitation within the meetings industry. The ten items were removed from the

scale in order to create a more parsimonious measure and to aid further analysis. A scree plot (after

removing these items) also suggested that there is more than one component, with no elbow clearly

identifiable until the third component.

4.3 Dimensionality in the scale

As the results indicate two possible components, a principal components analysis restricted to two

components using varimax rotation was performed. The resulting rotated component matrix

showed that the items were clearly related to each of the two components but the distinction

between those that load on factor 1 and those that load on factor 2 was not clear and did not appear

to be related to the four components of absorptive capacity. As the items related to each factor did

not share any obvious characteristics, a single factor model was retained.

The fact that the four previously theorised factors of absorptive capacity did not emerge does not

mean that these are not present or important within the sector or within the overall construct.

Indeed, it could be that they are so interrelated that they do not separate out into individual

components. They exist but operate simultaneously to create an environment where innovation can

occur through absorptive capacity. Each element is, therefore, needed within any scale which

attempts to measure absorptive capacity as a single concept.

Before investigating the characteristics of absorptive capacity and any sub-group differences within

the meetings industry, structural equation modelling was applied in order to identify a better fitting

model than that found in previous studies. This involved trialling two factor and single factor models

until the best fit was achieved. Table 1 summarises the process undertaken to identify the

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Table 1 Summary of model fitting results

Model No. Items Measures of

Fit: CFI and RMSEA

Items to exclude

1 17 Factor 1

24 Factor 2

0.682 0.094

Exclude all items with standardised coefficients less than 0.5

2 13 Factor 1

11 Factor 2

0.816 0.098

Improving – remove further items (<0.5)

3 13 Factor 1

9 Factor 2

0.844 0.095

Recognise covariance

4 22 items one

factor (abcap)

0.74 0.121

Poor fit – remove items with low regression weights

5 15 items 0.838

0.115

Improving

Remove remaining two items from ‘Factor 2’ as regression weights <0.5

6 13 items 0.873

0.113

Although two factors identified better fitting model based on one factor. Remove AS7 (RW<0.5)

7 12 items 0.88

0.117

Improving. Remove items AQ7 EX13 high covariance and low regression weights

8 10 items 0.92

0.100

Best fitting model – 1 factor (Ab Cap) 10 items.

The best fitting model is a reduced item single factor model containing a combination of items

originally classified as acquisition (1 item), assimilation (3 items), transformation (4 items) and

exploitation (2 items). Even though the RMSEA (Steiger-Lind root mean square error of

approximation) measure is not below the desired 0.05, at 0.1 it is acceptable and does not improve

with further item reduction. The CFI (Bentler comparative fit index) shows a very good fit at 0.924

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Structural equation modelling revealed that the four factor model theorised extensively in the

innovation literature and confirmed empirically in studies relating to manufacturing, does not fit

with absorptive capacity as it manifests itself in the meetings industry. Within this predominantly

business-to-business service sector, absorptive capacity is less pronounced than has been found

elsewhere; outward facing knowledge acquisition activities are prominent and are clearly related to

internal practices. There is far greater emphasis on acquisition, however, rather than its subsequent

use. The sampling frame may explain some of this as all respondents had chosen to be members of

an industry association. However, the data from the qualitative interviews also lead to the tentative

suggestion that even the organisations that were seen as amongst the most innovative, paid less

attention to mechanisms required for knowledge sharing. Exploring the data further in terms of

sub-group analysis sheds light on the particular characteristics of the industry and how they impact upon

absorptive capacity.

4.4 The absorptive capacity of organisations in the meetings industry

The items identified through structural equation modelling were combined to create a single

measure of absorptive capacity which could then be correlated with sub-sample characteristics and

the self-reported single measures of potential absorptive capacity, realised absorptive capacity and

relative innovativeness. The distribution of this measure of absorptive capacity is shown in Figure 2.

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With ten items and a five point likert scale, the maximum score that could be achieved was fifty and

the minimum was five. There is generally a normal spread but there are also a significant number of

organisations (2.4%) who show extremely high levels of absorptive capacity. Correlations were

performed to ascertain whether the characteristics of the organisations and respondents were

related to the absorptive capacity score. Table 2 shows the results of this analysis as well as the

correlations with the three single item questions which assessed organisations’ ability to acquire and

assimilate knowledge, an ability to transform and exploit knowledge and the level of innovativeness

relative to others in the sector.

Table 2 Correlations with organisation characteristics

Characteristic ACQUIRE and

ASSIMILATE

APPLY and EXPLOIT

Relative

Innovativeness Ab Cap Score

Number of

employees

Pearson Correlation

.071 .098 .078 .045

Sig. (2-tailed)

.327 .179 .296 .516

N

190 189 182 208

Years in

operation

Pearson Correlation

.110 .014 .074 .118

Sig. (2-tailed)

.130 .846 .319 .088

N

190 189 182 208

Years in

position

Pearson Correlation

.109 .077 .171* .182**

Sig. (2-tailed)

.135 .293 .021 .008

N

190 189 182 208

Years with

organsation

Pearson Correlation

.112 .071 .107 .173*

Sig. (2-tailed)

.123 .335 .152 .012

N

190 189 182 208

No of

businesses

learnt from

Pearson Correlation

.110 .083 .172* .104

Sig. (2-tailed)

.131 .255 .020 .133

N

190 189 182 208

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type Sig. (2-tailed)

.922 .367 .549 .662

N

190 189 182 208

ACQUIRE and ASSIMILATE

Pearson Correlation

1 .736** .530** .697**

Sig. (2-tailed)

.000 .000 .000

N

190 188 181 190

APPLY and EXPLOIT

Pearson Correlation

.736** 1 .597** .727**

Sig. (2-tailed) .000 .000 .000

N

188 189 180 189

*. Correlation is significant at the 0.05 level (2-tailed). **. Correlation is significant at the 0.01 level (2-tailed).

There is a very strong positive relationship between self-reported levels of innovativeness and

absorptive capacity, clearly connecting the two concepts as expected. Similarly, the simpler

measures of “How would you rate your ability acquire and assimilate information?” and “How would

you rate your ability to transform and exploit information?” are both positively correlated with the

absorptive capacity score, the rating of innovativeness and with each other. These correlations help

confirm the concept validity of the refined absorptive capacity scale and also indicate that there is a

level of awareness of what constitutes absorptive capacity within the sector. The number of

organisations learnt from is also correlated with their assessment of their organisation’s

innovativeness in that those who learn regularly from a larger number of organisations assess

themselves as more innovative than others in the sector.

Absorptive capacity shows no significant correlation with the firm characteristics of size, type or

length of time established. However, levels of absorptive capacity do appear to relate to the

orientation and capacity of individual managers; positive absorptive capacity scores are correlated

with individual respondents’ duration of employment in that company and their period of tenure in

their current position. Arguably, organisations with longer serving senior staff are better equipped

to develop that dimension of absorptive capacity that relates to acquisition of knowledge because of

the time it takes to establish networks within and outside the industry. Moreover, it also suggests

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Further analysis considered the higher scoring respondents only (all those with an absorptive

capacity score of forty or more). No correlations were found that suggested their characteristics

differed from the remainder of the sample (except in the role and length of service of the

respondent). However, though far from conclusive, an analysis of the comments provided to justify

their answers revealed a greater awareness of the role of experience in interpretation of external

knowledge and moderating factors relating to absorptive capacity. An analysis of the comments

provided by those with low absorptive capacity hinted at the low dynamic capabilities of these

organisations (Breznik and Hisrich, 2014; Sun and Anderson, 2008). By way of illustration,

respondents emphasised a variety of perceived organisational deficiencies that ranged from

‘incompetent and detached managers’, ‘centralised decision making (which) hampers the quick

implementation at the departmental level’ and an inability to engage with external networks for

innovative purposes. These statements must be read with caution and highlight the need for

additional qualitative enquiry (Hotho et al., 2012).

Respondents, in answer to open questions in the survey or when interviewed during the initial stage

of the project, described their networks in a manner which resonated with theoretically emerging

notions of ‘reciprocity’ (Ritala et al., 2015), ‘commitment-trust’ (Hashim and Tan, 2015) and

‘familiarity’ (Zheng and Yang, 2015). By way of illustration, information about past events that had

been secured by competitive tendering processes was shared freely by convention bureaus and

PCOs in the knowledge that they would not be awarded them again, with the confident expectation

that they would benefit from similar behaviour by others in their networks. Such confidence

emerges only from a familiarity with their network and trust in those with whom knowledge is being

shared.

5.0 CONCLUSION

The research reported in this paper advances our theoretical understanding of absorptive capacity as

well as making a potentially valuable contribution to policy and practice. By failing to identify an

empirical distinction between potential and realised absorptive capacity, or the four dimensions of

absorptive capacity discussed in the literature, it appears that, as anticipated, different dynamics are

at play within the meetings industry than in other, largely manufacturing, sectors. As a result, a

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Following earlier conceptualisations, the importance of external sources of knowledge

complemented by the possession of experience and business attributes that enable it to use the

external knowledge are retained. The relational nature of knowledge, which is emphasised in the

tourism literature and confirmed by the empirical findings, is acknowledged and the notion of

reciprocity introduced as factors that act as antecedents to absorptive capacity in the meetings

industry.

The survey evidence reported in this paper also suggests that leadership is critical and is most

effective when accompanied by high levels of tacit knowledge gained from experience in the sector.

In other words, much of the firms’ organisational knowledge (Vega –Jurado, Gutierrez-Garcia and

Fernandez-de-Lucio, 2008) relies on a small number of ‘core’ employees. The more personalised

nature of management suggests that creativity among leaders should also be accentuated in the

new model. What Amabile, Conti, Coon, Lazenby and Herron (1996) identified some time ago as one

of three vital elements of a creative organisation, namely its management practices, is likely to be

pivotal in the meetings industry. A more recent review (Anderson, Potocnik and Zhou, 2014) has

highlighted the need for additional research on the contribution of individual leadership to creativity

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From what has been revealed by previous research and confirmed by the interviews conducted for

this study, a culture of sharing knowledge within the enterprise represents an important dimension

of absorptive capacity. Vega-Jurado, Gutierrez-Garcia, Fernandez-de-Lucio and Manjarres-Henriquez

(2008) draw an important conceptual distinction between social integration mechanisms (those

practices that enable knowledge exchange within the enterprise) and the complementary notion of

formalisation (the extent to which rules and procedures govern employee behaviour). The level of

formalisation, they argue, may improve the efficiency of knowledge acquisition by creating policies

and systems. It is the social integration mechanisms, however, that are vital not only to its

distribution but particularly for its transformation and exploitation, where high level cognitive skills

are required. Both play an important role in the meetings industry but probably in a different

manner from other sectors. The data suggest that managers influence and participate directly and

informally in the iterative processes of acquiring, assimilating, transforming and exploiting

knowledge for organisational gain. To reflect this, knowledge acquisition, assimilation,

transformation and exploitation are represented as overlapping in the Venn diagram. The proximity

of leaders to their ‘core’ employees and to the market, even in larger businesses, suggests that they

play a more active role in bridging connections between acquired knowledge and generating

innovation and competitive advantage than in other, notably manufacturing, sectors.

The interviews conducted for this project suggest that innovations are difficult to protect in the

meetings industry, an observation confirmed in other tourism contexts (Decelle, 2004; Hall and

Williams, 2008). Thus, the competitive advantage gained from innovation tends to be relatively short

lived. The creation of strong regimes of appropriability (the mechanism to protect the innovation

such as secrecy, specialist knowledge, or the high cost of replication) is extremely difficult and not

worthy of significant investment of effort. Some of the structural characterises of the labour market

discussed earlier in the paper, notably the high circulation of temporary and freelance staff, suggests

that knowledge leakages are likely to be widespread (though, ironically, these have been identified

in some circumstances as contributing to knowledge acquisition). Interviews with key informants

confirm this analysis with the possible exception of innovation that contains a significant technical

element. Even in those cases, however, appropriation regimes are likely to be weak because the

suppliers who lead technical innovations tend not to work exclusively for one organisation in the

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The paper also contributes to the literature by showing, for the first time, that it is possible to

estimate the absorptive capacity of enterprises in the meetings industry. In principle, this might

extend to leisure tourism providers such as attractions, hotels and transport. This enables

researchers to trace the absorptive capacity of organisations in the sector over time and to

undertake comparative studies at the level of the destination.

Finally, in spite of the voluminous literature and the insights provided by this research, absorptive

capacity remains inside something of a ‘black box’. Perhaps the most immediate research challenge,

therefore, is the need to interrogate the concept in organisational contexts via detailed qualitative

enquiry. This should encompass an examination of the social relations within organisations as they

influence absorptive capacity. Without knowing more about the social processes at play, and their

consequences, theoretical understanding of absorptive capacity and its implications for innovation

and competitive advantage will be circumscribed, offering the ability to make relatively constrained

practical recommendations.

5.1 Implications for policy and practice

Several commentators have emphasised the role of public policy-makers in strengthening innovation

and destination competitiveness by facilitating knowledge flows. Pyo (2011) proposed a systematic

approach to creating connections between knowledge produced by universities and the knowledge

needs of destination stakeholders. The resulting co-constructed research agendas are held to

increase the opportunities for innovation (see also Hoarau and Kline, 2014; Jacob et al., 2014).

Weidenfeld (2013) examined flows of knowledge as part of an analysis of cross border innovation

systems concluding that specific measures to increase knowledge transfer across borders would

likely yield greater destination competitiveness. In a related vein, Kelliher and Reinl (2011) and Reinl

and Kelliher (2014) have illustrated the potential value of public sector intervention in creating

knowledge (learning) networks that enhance the competitiveness of small enterprises in tourism.

This paper complements existing approaches and introduces novel issues for policy-makers in

relation to the development of the meetings industry. The analysis provided opens up the possibility

of policy-makers identifying and working with enterprises that are most likely to be able to benefit

from the provision of external knowledge and to identify those from whom others may learn. The

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monitoring and evaluation of policy actions. This adds a new dimension to the nascent tourism

innovation policy literature (e.g. Hall, 2009; Rodriguez et al., 2014).

The research findings also have implications for practitioners. They suggest that progressive

managers might now monitor the absorptive capacity of the enterprises they lead and reflect upon

the various dimensions of the model to improve organisational innovation. For many, this should

probably result in a re-orientation of emphasis to include how they use the knowledge they gain

from their networks. Developing imaginative ways of developing bonds with otherwise transient

labour, with the intention of harnessing their tacit knowledge and creativity, might also prove a

fruitful avenue for consideration.

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Figure

Figure 1 A model of absorptive capacity
Table 1 Summary of model fitting results
Figure 2 Absorptive capacity score distribution
Table 2 Correlations with organisation characteristics

References

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